From trip planning to in-flight experience to hotel stays, travellers rely on their loyalty program of choice to inform their decisions, ensure they get the best value, and help finance their travel dreams through points and miles. Though uncertainty still clouds our view of travel’s recovery, loyalty programs remain a vital driver of engagement and revenue in a volatile time, and the disruption of the pandemic has forced—or freed—them to expand their value in innovative new ways.
With the help of our in-house experts, we’ve identified five emerging trends that should be at the forefront of any major loyalty program’s mind as they navigate the travel recovery phase.
Once a business model synonymous with magazines and newspapers, subscription services have proven to be hugely successful for a host of different industries with game-changers like Netflix and Spotify paving the way. “All industries, including travel, are looking at subscriptions and any kind of recurring revenue generation and regular engagement right now,” says Jane Helman, VP, Product Innovation and Growth.
The potential payoff of a subscription model is enticing for many airlines and hotels. “There are many flavours of subscription out there and we at Points are working collaboratively with our partners and their programs to see which one fits and how to bring that to life,” says Jane.
For decades, members have happily earned over the long term to meet their travel goals. But to stay current, loyalty programs have to rethink instant gratification in order to keep up in a competitive market. This is where a subscription service can help, providing both an immediate reward on top of long-term aspiration. “If you can engage someone and get them their first reward within the first month or first six months, that member is far more likely to stay loyal and stay engaged within that program,” says Jane. “It’s all about finding a way to capture consistent engagement on a longer-term basis.”
Takeaway: Subscription options within a loyalty program create recurring revenue and consistent engagement—a win-win.
Where business travel was once a boon to hotels and airlines pre-pandemic, new research suggests that it will be Gen Z and millennial travellers who will carry the weight of the travel and hospitality recovery. As a cohort, millennials now make up the largest living adult demographic, with Gen Z only slightly behind. Taking an average of 2.8 trips per year (pre-pandemic), these young explorers see travel not as a luxury, but an essential part of a meaningful life, with over 40 percent saying that travel is necessary for a life well-lived.
Data provided by the Fuel COVID-19 Consumer Sentiment Study shows that younger generations are less risk-averse and more eager to travel than both Gen X-ers and Boomers. And their predictions were right: an American Express Travel Survey as reported by TravelPulse reveals that 48 percent of millennials traveled over the US Memorial Day weekend, at the same time that Gen Z beefed up their spending 125% compared to 2019.
Hyper-connected Gen Z and tail-end millennials are changing the industry even beyond spearheading 2021 travel. Their combination of adventurous spirit and budget consciousness will give loyalty programs an invaluable opportunity to design new types of rewards, redemption opportunities, and modes of payment. For instance, the new Bilt Rewards program empowers members to earn points/miles on their rent payments—typically the millennial cohort’s biggest expense—with a 1:1 transfer to a variety of programs including Hyatt, American Airlines, and more.
Takeaway: Innovate now to meet the distinct needs of Gen Z and millennial travellers, and you’ll have a head start on attracting your program’s future best customers.
Today’s analytics teams have sophisticated tools and prediction models that allow loyalty programs to make good use of the reams of member data available to them. But despite this information treasure trove, only a meager 22% of loyalty program members are satisfied with the level of personalization within their programs.
“Engagement demands a higher degree of personalization now, otherwise loyalty programs can become irrelevant,” cautions Danielle Brown, Chief Marketing Officer. “There are so many different levels of sophistication in personalization and if you’re not playing at even the most minimal level you’re going to be missing out.”
It’s important to remember that personalization isn’t a ‘set it and forget it’ proposition. When the pandemic changed members’ travel behaviors significantly, Points got to work re-learning their needs and goals in an unprecedented time of low demand. “The year 2020 was an opportunity for us to get to know members in a different way—their interactions with us were more aspirational, and in some ways provided hope in a pretty dark time,” says Danielle.
Diving deeply into extensive member data and applying sophisticated modeling enabled Points to deduce the best products and offers to put in front of specific groups of members at a given time, and it’s this level of relevancy that will help nurture true loyalty during the recovery. “We managed to attract a large number of first-time transactors during this period, and I think we'll see this deepening sense of an emotional connection in the coming years,” says Danielle.
Takeaway: Gone are the days of one-size-fits-all offers. Focus on responsible, dynamic personalization now or get left behind.
As fraud tactics become more sophisticated, and breaches more prevalent, data security will continue to be a top priority for loyalty programs and their members. According to a 2019 report by Forter Fraud Index, loyalty programs saw a nearly 90% increase in fraud attempts year over year, with airlines alone reeling from a 61% jump in account-based and transactional fraud attacks. The rate of fraud plateaued during the pandemic, making fraud attempts easier to spot, but in times of recovery this won’t be as clear. Travel demand begets loyalty fraud activity, so as travel picks up, we can expect fraud will, too.
All aspects of security and fraud require constant monitoring and mitigation, and the theft and misuse of miles and points, known as gaming, will be an ongoing battle in the coming years. “Gaming is in part about pushing the bounds of the terms and conditions. It goes against the nature of what these great programs are meant to be,” says Tina Burgess, Director, Risk and ePayments.
The cost of gaming to programs and their members goes far beyond missing miles. Without the right support systems, this brand of fraud can erode trust and engagement within a loyalty program and pose serious risks to sensitive data.
“No single hotel or airline can look at fraud at the vantage point that we can and it can be very difficult to detect on your own. A lot of fraud is coming from account takeovers, so in a way, everything looks normal,” explains Tina. “What’s unique about Points is that our risk team is looking at transactions across many products, partners, and currencies, giving us connective pieces of information, which allows us to see the full picture to better spot, stop, and prevent fraud in the first place.”
Takeaway: Fraud is on the rise and without the right prevention and mitigation it can permanently damage the integrity of a loyalty program.
According to recent research by Harvard Business Review, in today’s loyalty landscape, over 50 percent of airline miles are not earned on flights. “The modern loyalty member views their program as passive income,” says Danielle. “They value their everyday earning and redemption opportunities as much as they do big-ticket rewards like flights and hotel stays.”
The steady move towards everyday earning has only accelerated with the pandemic’s impact on travel. Loyalty programs leaned into non-travel earn options that had more immediate relevance than flights and hotel stays: for example, Points accelerated our partnerships with service providers outside of travel, like the ability to earn and spend points and miles on meals cooked at home with Home Chef, or on ride-sharing with Lyft.
“Integrating non-core partners into the loyalty ecosystem increases the value of that currency for the member, stitching it into the fabric of their day-to-day,” explains Danielle. “What the pandemic did to accelerate the growth of this ecosystem was to expose all of the different currency utility options to members, thereby making adoption more obvious.”
Takeaway: The future of loyalty engagement will lean on a vast network of alternative earning opportunities, to take part in more of the customer journey.
Sources: